interpretation of statements

interpretation of statements

1. Calculate total prime costs and total conversion costs.
2. Calculate total inventoriable costs and period costs
3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product
costs?
4. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of 2 million units. Determine the unit
cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment. assume that yearly deprecitaion is computed on a
staight line basis.
5. Assume that the implied cost behavior patterns in requirement 4 persist. That is direct material costs behave as a variable cost and depreciation on plant and
equipment behaves as a fixed cost. Repeat the computations in requirement 4 assuming that the costs are being predicted for the manufacture of 3 million units.
Determine the effects on total costs.
6. Assume that deprecitaion on equipment not plant is computed based on number of units produced. The depreciation rate on equipment is $1 per unit. Calculate
depreciation assuming 2 million produced and 3 million produced.

For Specific Date (in millions) For Year 2011
work in process inventory 1/1/11 $18 plant utilities $9
direct materials inventory 12/31/11 $8 indirect manufacturing labor $27
finished good inventory 12/31/11 11 depreciation plant and equipment 6
accounts payable 12/31/11 24 revenues 355
accounts receivable 1/1/11 52 miscellaneous manufacturing overhead 15
work in process inventory 12/31/11 3 marketing distribution and customer
service costs 94
finished goods inventory 1/1/11 47 direct materials purchased 84
accounts receivable 12/31/11 38 direct manufacturing labor 42
accounts payable 1/1/11 49 plant supplies used 4
direct materials inventory 1/1/11 32 property taxes on plant 2

1. Calculate total prime costs and total conversion costs.
2. Calculate total inventoriable costs and period costs
3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product
costs?
4. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of 2 million units. Determine the unit
cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment. assume that yearly deprecitaion is computed on a
staight line basis.
5. Assume that the implied cost behavior patterns in requirement 4 persist. That is direct material costs behave as a variable cost and depreciation on plant and
equipment behaves as a fixed cost. Repeat the computations in requirement 4 assuming that the costs are being predicted for the manufacture of 3 million units.
Determine the effects on total costs.
6. Assume that deprecitaion on equipment not plant is computed based on number of units produced. The depreciation rate on equipment is $1 per unit. Calculate
depreciation assuming 2 million produced and 3 million produced.

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